TMI Blog1997 (10) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed that the same should not be reduced from the cost. The AO, however, did not accept the claim of the assessee and disallowed depreciation of Rs. 34,289. 3.2. On first appeal the learned CIT(A) observed that in the cases relied upon by the learned counsel for the assessee the subsidy had been received under the scheme of Central Govt. and that in the instant case subsidy had been received directly on diesel generating set and hence the judgment cited by the learned counsel were not applicable. He, therefore, confirmed the action of the AO in reducing the cost and disallowing depreciation of Rs. 34,289. 3.3. During the course of hearing the learned counsel for the assessee referred to the Special Bench Decision of the Tribunal in the case of Sutlej Cotton Mills Ltd. vs. Asstt. CIT (1993) 46 TTJ (Cal) (SB) 310 : (1993) 199 ITR 164 (AT), wherein the Tribunal confirmed the action of the AO in reducing the cost of the generator set by the amount of subsidy to arrive at the actual cost within the meaning of s. 43(1) of the IT Act. The learned Departmental Representative had nothing more to add in view of the said Special Bench decision of the Tribunal. 3.4. We have carefully c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward such investment allowance before allowing deduction under s. 80HH. He relied on the judgment of the Supreme Court in the case of CIT vs. Canara Workshop (P) Ltd. (1986) 58 CTR (SC) 108 : (1986) 161 ITR 320 (SC). The learned CIT(A) considered the submissions and observed that the claim of the assessee amounted to giving benefit under s. 80HH of old units, which position was not acceptable and that the said point was not considered by the aforesaid judgment. He, therefore, confirmed the orders of the AO. 5.3. The learned counsel for the assessee submitted before us that deduction under s. 80HH was claimed in respect of unit No. 2 at Bhawani Mandi at Rs. 27,38,700. He further submitted that the Departmental authorities have only allowed a deduction of Rs. 12,11,255 by notionally setting off investment allowance of Rs. 76,36,244 related to eligible unit, although the same had already been absorbed against the profits of other units in the earlier years. He referred to the decision of the Hon ble Calcutta High Court in the case of CIT vs. Balmer Lawrie Co. Ltd. (1995) 215 ITR 249 (Cal), wherein it was held that "the relief under s. 80-I of the IT Act, 1961, has to be calcul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to asst. yr. 1970-71 and then the deficiency for earlier years under s. 80J. The view of the Tribunal was confirmed by the Hon ble Supreme Court. In the case of Rajapalayam Mills Ltd. it was held by the Hon ble Supreme Court that" s. 15C(3) does not enact any legal fiction providing that the profits and gains of the new industrial undertaking shall be computed as if the new industrial undertaking were only business of the assessee from the date of its establishment or as if the past year s depreciation or development rebate had not been set off against other income of the assessee. The new industrial undertaking is not retrospectively quarantined or isolated from the other income producing activities of the assessee for determining its profits or gains for the purpose of applicability of sub-s. (1) of s. 15C". It was further held that "neither depreciation allowance nor development rebate in respect of the new industrial undertaking for the past assessment years can be allowed as a reduction in computing the profits or gains for the assessment year in question, except where and to the extent to which it has not been set off against the total income of the assessee for those asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng additional lines, to the assessee s factory as capital expenditure. 8.2. On first appeal the learned CIT(A), however, for the reasons recorded in the order allowed the said expenditure as revenue expenditure. He observed in the process that the property in the additional lines vested in the Rajasthan State Electricity Board and not the assessee. He accordingly directed the AO to allow the said expenditure. The Department is aggrieved. 8.3. The learned Departmental Representative relied heavily on the orders of the AO. He submitted that the additional lines had been laid down in connection with the business of the assessee and that the assessee derived benefit of enduring nature, as the additional lines could not have been used by any other person and that the assessee had exclusive user of the said lines. He, therefore, urged that the AO rightly treated the said expenditure as capital in nature. 8.4. The learned counsel for the assessee, however, relied heavily on the orders of the learned CIT(A). He further referred to the decision of the Hon ble Bombay High Court in the case of CIT vs. Excel Industries Ltd. (1980) 14 CTR (Bom) 44 : (1980) 122 ITR 995 (Bom), wherein it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t relates to directions issued to the AO to allow Rs. 16,220 paid to Rajasthan State Electricity Board for shifting of KV lines as revenue expenditure. 9.1. The AO treated the expenditure of Rs. 16,220 paid to Rajasthan State Electricity Board for shifting 11 KV lines installed at the assessee s factory as capital expenditure. 9.2. On first appeal the learned CIT(A) treated the said expenditure as of revenue in nature. He relied on the decision of the Tribunal, Calcutta Benches in the cases of Andaman Timber India Ltd. dt.11th Sept., 1985in ITA Nos. 744-747 (Cal) 84. 9.3. The learned Departmental Representative relied on the orders of the AO. 9.4. The learned counsel relied heavily on the orders of the learned CIT(A) and he advanced the same arguments as in the case of ground No. 1 relating to payments made to Rajasthan State Electricity Board for laying additional lines. 9.5. We have carefully considered the rival submissions on this issue and for the reasons given in relation to ground No. 1 taken by the Department, we see no reason to interfere with the orders of the learned CIT(A) on this issue. 10. Ground No. 3 raised by the Department relates to deletion of the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tan Co., M.L. Sharma Co. and D.M. Harish Co. as legal charges. He referred to the provisions of s. 40A(12) and held that only Rs. 10,000 were allowable. He, therefore, disallowed the balance amount of Rs. 3,090. 12.2. On first appeal the learned counsel for the assessee submitted that under s. 40A(12) the amount of Rs. 10,000 was allowable for each assessment year. In this connection he relied on the order of the CIT(A) Central-I,Calcuttain the case of Birla Buildings Ltd. in appeal No. 530/CIT(A)-CI/88-89 dt.28th April, 1989. The learned CIT(A) accepted the contentions of the learned counsel and deleted the addition. 12.3. While the learned Departmental Representative relied on the orders of the AO, the learned counsel relied on the orders of the learned CIT(A). He further referred to the decision of the Tribunal, Calcutta Benches in the case of Asstt. CIT vs. Birla Building Ltd. reported in (1992) 43 ITD 586 (Cal), whereby it was held that the limit of Rs. 10,000 referred to in s. 40A(12) applied to proceedings of each assessment year. He further referred to the decision of the Tribunal dt. 28th July, 1997 in ITA No. 2081 and 2206 (Del) 91 in the case of the assessee fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the contentions of the learned counsel and directed the AO to allow depreciation as claimed by the assessee. 13.3. The learned Departmental Representative relied heavily on the orders of the AO and submitted that depreciation cannot be allowed unless the property is registered in the name of the assessee. 13.4. The learned counsel for the assessee relied on the orders of the learned CIT(A) and also referred to the recent judgment of the Hon ble Supreme Court in the case of CIT vs. Podar Cement (P) Ltd. (1997) 141 CTR (SC) 67 : (1997) 226 ITR 625 (SC), wherein it was held in the context of s. 22 that "owner is a person who is entitled to receive income in his own right and for purposes of that section, registration of sale deed is not necessary condition to constitute ownership. It was further held that the amendment to s. 27 by the Finance Act, 1987, was clarificatory in nature so far as the amendment related cls. (iii), (iiia) (iiib). He also mentioned that the Hon ble Supreme Court have approved the decision of the Hon ble Allahabad High Court in the case of Addl. CIT vs. U.P. State Agro Industrial Corpn. (1981) 20 CTR (All) 141 : (1981) 127 ITR 97 (All). The learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest paid by the assessee on borrowed funds advanced as loans at 4 per cent to its subsidiary companies. 15.1. In this case the AO noted that the assessee-company had advanced unsecured loans to its subsidiary companies at the end of the accounting year. The said advance aggregated to Rs. 1,46,50,000 in the case of SCM Investment Trading Co. Ltd. Similarly, the advance made to RTM Investment Trading Co. Ltd. amounted to Rs. 1,59,00,000. The AO further observed that the payments had been made by the assessee from current account with Punjab National Bank,CalcuttaandBombay. For the reasons given in his orders the AO disallowed an amount of Rs. 1 lakh paid by the assessee to the bank on overdrawals made from cash credit account. He held that the expenditure on interest was not for the purposes of assessee s own business and that he was not eligible for deduction under s. 36(1)(iii) of the IT Act. 15.2. On first appeal the learned counsel for the assessee submitted that the amounts were advanced from the current account and that in the said account, funds were transferred from cash credit account maintained at Bhewani Mandi factory also. He also pointed out that the sale proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the learned CIT(A). 15.5. We have carefully considered the submissions made by both the parties and have also perused the orders of the Departmental authorities and other documents placed in the paper-book to which our attention was invited during the course of hearing. We feel that in view of the overwhelming evidence placed before us we agree with the line of reasoning of the learned CIT(A) in deleting the disallowance of Rs. 1 lakh. This ground is, therefore, rejected. 16. Ground No. 2 raised by the Department relates to deletion of disallowance of Rs. 21,582 being the amount given to employees at the time of marriages. 16.1. The learned Departmental Representative and the learned counsel advanced the same arguments before us as in the case of similar ground for asst. yr. 1987-88. 16.2. Keeping in view our decision on the aforesaid ground in the appeal for asst. yr. 1987-88, we decline to interfere with the orders of the learned CIT(A) on this issue. 17. Ground No. 3 raised by the Department relates to deletion of disallowance of Rs. 11,458 on account of payment of fines for traffic violations. 17.1. The learned Departmental Representative and the learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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